GE s 2 Decade Transformation

Jack Welchs Leadership

GE at a glance
Founded by Thomas Edison in 1878, grown to be a leading diversified multinational conglomerate in 1973

Headquartered in Fairfield, Connecticut, United States

Operating in Five Segments 1. Energy 2. Technology Infrastructure 3. Capital finance 4. Consumer goods 5. Industrial goods

The GE Heritage
1930s Highly centralized 1950s leading towards decentralization 10 Groups 46 Divisions 190 Departments 43 Strategic Business Units 1973 Reg Jones became CEO Welchs predecessor

Raised strategic planning to an art form

Voted CEO of the year thrice and Journal dubbed him CEO of the decade in 1979

Brief introduction to Jack Welch

Took over GE at the age of 45 in 1981 during recession period with high unemployment

Known for making GE the most admired company for three consecutive years from 1998
Generated 23% p.a total share holder return Brought in massive reorganization and restructuring in the company making it 75% service oriented from 15% Known as Neutron Jack for the drastic changes he brought forth

Led GE towards globalization

WELCHS ERA

1981-85
GES RESTRUCTU RING

LATE 1980s:
ROCKETS 2ND STAGE

1991-95:
Third Wave

CLOSING THE DECADE:

Raising the bar

GE as a conglomerate defying critics

Understanding the strength areas and weaknesses

Cutting down the vestigial organs of the excessively grown company that destroy the value, time and resources of the company
Making it lean and thin a fit organization is healthy can perform better than obese one Opening communication Focus investment facilitation Intervening

Adding value to GE Welchs way

Structure
Culture People Strategy

Lean

Evolving Open
A-players 4Es #1 or #2 going global Best practices

Structure
Selling off of 200 underperforming businesses including consumer electronic Freed $11 Billion from such sell outs eliminating 12270 staff

Further 370 acquisitions with an investment of $21 Billion

Made GE lean and agile cutting 50% of strategic planning staff (200)

Downsizing, de-staffing and de-layering of 59290 salaried and 6410 hourly positions
Even after acquisitions, the staff fell from 404,000 to 33,000

Revenues went from $ 27.2 billion to $ 29.2 billion between 1981 to 1985

Culture and people : Moving to the SOFTWARE

Focused on Work Culture i.e Software of GE in the later part of 1980s

Brought forth idea of open forum known as WORK OUT PROCESS

Focus on HOW DO I ADD VALUE and how I make people in line MORE EFFECTIVE? 1. Offsite meeting of 40-100 people 2. Instant on the spot decision (at least 80%) So by 1992, GEs 2/3rd of staff i.e 200,000 had been in the process and the company could feel significant cut in BUREAUCRACY Lead to the formation of A players, 4Es and Strategy Book

Strategy: chipping out the bureaucracy making big conglomerate work

Scrapped laborious strategic planning system Replaced with real time planning 5 page strategy book that answered: 1. Current Market Dynamics 2. Competitors recent and major activity 3. GEs business response 4. Greatest competitive threat for next three years 5. GEs planned response

This cleared the employees in vision and brought top management and employees in the same page!

Strategy: Best Practices learning, improvising and implementing

Best and well adopted methods of companies faring well in the market with better productivity than GE and integrating in the system, like: Customer Satisfaction Treating suppliers as partners This lead to many employees realizing and correcting their mistakes as they were focusing in WHAT rather than HOW

Challenges faced by Welch

The ongoing recession resulting in the countries highest unemployment rate and GE had 404,000employees Company was too much diversified into:

1. Power Generation
2. Household appliances 3. Lighting 5. Aircraft Engines 6. Medical system 7. Diesel Locomotives Was already a big name and Welchs predecessor had set high bars for him with Japanese giving tough global competition

Welchs effective steps for the change

1. GEs restructuring 3 circle Concept

Reinvesting in product and quality

Core

Service
Good people leading to contiguous acquisition

Technology
Stay on leading edge technology

2. Rockets Second Stage

Software initiatives
Work-out Best practices

Going Global
Exchange deal with French company Revenues shot up

Developing Leaders
Crotonville Management development facility Four types of leaders 360-degree feedback

Boundary-less Behavior

3. The Third Wave

Stretch: Achieving the Impossible

Service businesses

4. Closing out the decade

Six Sigma Quality Initiative 3.4 defects per million operations

Tied 40% bonus to Individuals Six Sigma objectives

A players with Four Es 4Es Energy, Ability to Energize others, Edge and Execution Individuals with vision, leadership, energy, and courage

Evaluating Welchs approach to leading change

Kotters 8 steps of transforming organization 1. Establish a Sense of Urgency Be #1 or #2 or get closed

2. Form a Powerful Guiding Coalition A players and 4 Es

3. Create a Vision Be better than the BEST 4. Communicate the Vision Strategy Book 5. Empower Others to Act on the Vision 4 Es, Work Out session 6. Plan and create short-term wins Work out session

7. Consolidate Improvements and Produce Still More Change Best Practices

8. Institutionalize New Approaches Learner Best Practices

How effective and important was his role in GEs success

All this lead to From near around $42 millions, sales rose to approximately $105 millions ROE grew by around 9 to 28.7%

Net earnings went to $12,735 million dollars from $1,652

Operating profit was up to $19,630 million dollars Sales soared from $52619 million dollars to $129,853 million dollars

So, was he effective enough to play an important role in GEs success or not??
It is up to the audience to decide